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Nio Stock Slides After Cutting Production Outlook

Published 29/12/2022, 05:38
Updated 09/07/2023, 11:31
  • Nio stock slipped again to trade about 70% lower year-to-date after the EV manufacturer's decision to lower the Q4 outlook for deliveries
  • The disappointing business update sent shares lower, hitting below $10 a share for the first time in a month

US-listed shares of the Chinese electric vehicle (EV) manufacturer Nio (NYSE:NIO) are trading lower again this week after the car business trimmed its Q4 outlook for deliveries due to supply chain constraints as a result of the latest coronavirus outbreak in China.

The updated forecast shows Nio now expects to deliver 38,500 to 39,500 electric vehicles in Q4 2022, down from the previous outlook of 43,000 to 48,000 vehicles, according to the company’s business update.

Nio said supply chain disruptions caused by the most recent COVID-19 outbreak in China’s major cities led to a slowdown in the company’s operations in December and delivery delays and registration problems.

Nio Presents New EV Models

The EV maker rolled out two new electric SUVs last week - the EC7 and the ES8 and said it would begin shipping the new models in May and June next year.

With the two new models, Nio is looking to take on premium petrol-powered cars manufactured by German auto giants like Mercedes-Benz and BMW.

Nio’s new SUVs are equipped with Lidar sensors and acclaimed NVIDIA Orin chips. The standard edition of the EC7, which has a driving range of 490 kilometers on a single charge, will cost 488,000 yuan ($69,817).

Similarly, the basic edition ES8, which can cover 465km on a single charge, will be priced slightly higher at 528,000 yuan. William Li, co-founder and CEO of Nio, said,

“Smart EVs will be increasingly well received by wealthy motorists, the trend is irreversible.”

The rollout comes amid a slowdown in the EV market and an improved sentiment toward cheaper cars made by Chinese manufacturers. But Li said he still hopes that the mainland Chinese EV market will pick up speed in May 2023, when Nio is expected to deliver its new models.

“We predict that production and sales in the domestic EV industry will still be impacted by the COVID-19 pandemic early next year. The scrapping of cash subsidies may also siphon off buying interest initially.”

China is set to roll down and discontinue cash subsidies for EV buyers on Jan. 1, 2023. Until then, consumers who purchase an EV with a driving range of over 400 km are eligible for a subsidy of 12,600 yuan ($1,806).

Alongside XPeng and Li Auto, Nio remains one of the three top Chinese carmakers that compete with Tesla’s Gigafactory 3 in Shanghai. The Hefei-based company delivered 106,671 vehicles in the first 11 months of 2022, up 31.8% from the year ago.

Still, all three startups trail BYD, which is currently dominating China’s EV market, including Tesla (NASDAQ:TSLA).

Outlook Cut Despite Solid Q3 Results

Nio’s Q4 outlook reduction comes after the EV maker reported an adjusted quarterly loss of 2.11 yuan (29 cents) a share, while analysts were expecting a loss of 1.02 yuan per share.

Revenue was 33% higher year-over-year at 13 billion, though also below consensus estimates. Nio also reported a loss of $577.9 million for its third quarter, significantly higher than in the same quarter last year.

However, Nio’s production and sales figures in the third quarter remained strong, with the carmaker posting a 33% revenue increase from the year ago. The company also continued to forecast high demand for its new electric cars.

The company’s Q3 cost of sales increased by 44% year-on-year and 26% compared to Q2 2022 due to higher delivery volumes and battery costs.

Research and development expenses more than doubled from last year and were up 37% sequentially. At the same time, selling, general, and administrative costs increased by 49% and 19% from last year and the prior quarter, respectively.

The company’s gross margin stood at 13.3% in the third quarter, up from the 13% it reported in Q2 but down from 20.3% in the year-ago period.

The annual margin drop came because of weaker sales of regulatory credits, mounting costs, and higher spending on the company’s charging and service networks, Nio said.

Li said that the EV producer also noted strong demand for its recently launched ET5 sedan, which is expected to play a pivotal role in driving the company’s Q4 revenue growth.

Elsewhere, the China Passenger Car Association (CPCA) data showed earlier this month that sales of new-energy vehicles (NEVs) - including pure electric, plug-in hybrid, and fuel-cell cars - declined by 9.5% to 1.67 million units in November on a year-over-year basis.

Cui Dongshu, the CPCA's secretary general, said,

"The November sales were far worse than previous expectations. The current trend is unprecedented since the financial crisis in 2008,"

Shane Neagle is the EIC of The Tokenist. Check out The Tokenist’s free newsletter, Five Minute Finance, for weekly analysis of the biggest trends in finance and technology.

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